WASHINGTON, March 9 (Reuters) – The number of Americans filing new claims for jobless benefits rose by the most in five months last week, but the underlying trend remained consistent with a tight labor market.
Part of the larger-than-expected increase in claims reported by the Labor Department on Thursday reflected a surge in filings in New York state, which some economists attributed to a mid-winter school break from 20-24. February. There was also a sharp increase in applications in California.
“Even after taking the recent increase into account, the unemployment rate is unusually low by historical standards, underscoring how tight labor market conditions remain,” said Michael Pearce, chief U.S. economist at Oxford Economics in New York.
“It is possible that this is an early sign that the increase in announced layoffs is starting to filter through to some job losses, but not all announced layoffs translate into job cuts.”
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Initial claims for state jobless benefits rose by 21,000 to a seasonally adjusted 211,000 for the week ended March 4. It was the biggest increase since October and lifted claims to a two-month high. Still, claims remained well below the 300,000 level associated with a recession.
Economists polled by Reuters had forecast 195,000 claims for the past week. The four-week moving average for new claims, a better measure of labor market trends since it smooths out weekly fluctuations, rose 4,000 to 197,000 last week.
Claims had remained below 200,000 for seven consecutive weeks, indicating that high-profile job cuts in the technology sector had not had a significant impact on the labor market.
Economists have previously argued that seasonal adjustment factors, the model the government uses to remove seasonality from the data, could keep claims down.
The seasonal adjustment factors for 2023 will be updated at the end of March. Goldman Sachs believed residual seasonality accounted for about half of last week’s rise in claims.
“Seasonal adjustment issues have exerted increasing pressure on initial claims over the past few months, and that pressure will begin to reverse in a few weeks, although annual revisions to the seasonality factors in early April could potentially eliminate seasonality distortions,” Goldman Sachs said in a note.
Unadjusted claims rose 35,357 to 237,513 last week. They were boosted by a 16,363 jump in filings in New York and a 10,489 increase in California. There were also notable increases in applications in Kentucky, Oregon and Ohio. But claims in Rhode Island and Massachusetts dropped significantly.
According to Lou Crandall, chief economist at Wrightson ICAP, the increase in New York state claims “was a predictable response to last week’s mid-winter school break and will likely be reversed in next week’s report.” Crandall viewed the rise in California filings as “likely more sustained” and expected total claims to retreat to the 195,000-200,000 range when this week’s data is released next Thursday.
Stocks on Wall Street were trading higher. The dollar fell against a basket of currencies. US Treasury prices were mixed.
FINISHED WORKERS BARELY
Data on Wednesday showed that there were 1.9 job openings for every vacancy in January. The Fed’s “Beige Book” report, also released Wednesday, described the labor market as remaining “solid” in February, noting “scattered reports of layoffs” and that “finding workers with desired skills or experience remained challenging.”
With a persistently tight labor market, strong inflation readings and robust consumer spending in January, Fed Chairman Jerome Powell told lawmakers this week that the U.S. central bank would likely have to raise interest rates more than expected.
The financial markets have priced in an interest rate increase of 50 basis points at the Fed’s policy meeting on 21-22. March, according to CME Group’s FedWatch tool.
The Fed has raised its key interest rate by 450 basis points since last March from the near-zero level to the current range of 4.50%-4.75%.
The number of people receiving benefits after a first week of aid, a proxy for employment, rose 69,000 to 1.718 million during the week ended Feb. 25, the claims report also showed. So-called continuing claims remain low, suggesting that some laid-off workers can easily find new work.
The claims data has no bearing on February’s employment report, which is scheduled to be released on Friday as it falls outside the survey period.
According to a Reuters poll of economists, nonfarm payrolls likely rose by 205,000 jobs in February after rising by 517,000 in January. The unemployment rate is expected to be unchanged at more than a 53-1/2-year low of 3.4%.
However, the labor market has cooled on the margins. A report from global outplacement firm Challenger, Gray & Christmas showed on Thursday that job cuts announced by US-based employers fell 24% to 77,770 in February. However, planned layoffs were 410% higher compared to the same period last year. It was also the highest number in February since 2009.
Cuts were concentrated in the technology industry, which accounted for 28% of layoffs announced last month. Retailers and finance companies are also cutting staff.
“At 1.9 vacancies per job seeker, laid-off workers appear to be quickly finding re-employment, which could make unemployment dynamics quite different from historical experience if layoffs continue to rise,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama, Andrea Ricci and Paul Simao
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